5.1 The Likely Impacts of High Bandwidth Networks on the Turkish Economy

According to the National Broadband Vision Study of Turkey,* Turkish Prime Minister’s Office (2011), From Silk Road to Broadband: Enabling Economic Growth and Competitiveness, Ankara. through fostering broadband development the Turkish economy could gain US$ 4.9-10 billion extra value added each year thereby boosting its economic growth by 0.8-1.7 percentage points. This economic momentum enabled by an enhanced broadband ecosystem would bring 180,000-380,000 new jobs and provide new income opportunities. This implies that employment creation in new broadband-related activities would eventually compensate for job loss due to process optimization and structural displacements.

Through help of a toolkit* Broadband Dynamic Value Assessment (BDVA) is a toolkit that fills a niche between the macroeconomic models that link broadband to aggregate economic growth and models that take a wholly microeconomic approach, measuring specific benefits of broadband by sector or type of usage. The BDVA focuses on broadband implementation objectives of public policy that link broadband penetration rates to “pillars”, which in turn, drive GDP growth. The pillars are essentially proxies for broadband implementation objectives. In this manner, the model user can identify which of these pillars have the greatest impact on GDP growth and use this information to formulate a national policy mix for achieving the greatest benefits from wider broadband usage the Broadband National Vision Study reports to find a significant growth impact for the Turkish economy fueled by broadband enhancing public policies. In the baseline growth scenario Turkish economy would take off by an annual rate of 5.0 per cent as depicted in Figure 5‑1, and it would reach the US$ 1,216 billion GDP level by the end of 2023.

Under the broadband enhancing growth scenario in which a set of active government programs to boost broadband impact are introduced, the economic growth forecast is much faster, with an additional 2.3 percentage points, reaching to 7.3% on annual basis. Government policies targeting enhanced broadband infrastructure and ecosystem will boost economic growth significantly. By 2023 the Turkish economy would have a GDP at USD 1,652 billion rather than USD 1,216 billion of the baseline scenario. This is a GDP level 36% greater than the baseline. It may accurately be called the broadband effect.

The broadband effect encompasses two distinctive categories: Industry benefits (measured as USD 289 billion during 2010-2023) comprising of the overall broadband productivity impacts within and beyond the ICT industry; and pillar effects (measured as USD 147 billion during 2010-2023) which might directly be associated with broadband enhancing policies of the government. Since industry benefits are nearly two times larger than pillar benefits for Turkish economy, broadband enhancing policies should trigger a multiplier effect within the economy and their indirect impacts could potentially outpace the direct effects.

The study also analyzes detailed impacts of enhanced broadband polices on different economic sectors, the so called pillar effects. Pillar effects can be decomposed into different sectors as follows:

- 7 per cent of total pillar effects will come from revitalized small/medium business;

- 6 per cent contribution will arrive from improved government services;

- 4 per cent to come from the benefits of broadband-enabled education;

16 per cent to come from a more attractive business environment;

- 67 per cent to come from other sectors, as well as multi-factor productivity and the benefits of collaboration across the economy.

Analyses indicate forecast benefits from increased ICT adoption by the SME sector will be large and e-government applications would provide a significant amount of contribution through cutting costs and improving productivity. Another important policy area that should be focused is education. The main benefit seems to be improvements in the general business environment. Under the broadband enhanced scenario policies to foster the business environment, 16 % of total pillar effects will come from improvements in the business framework alone. The largest one is the multiplier effect. Broadband adoption will bring benefits diffusing beyond the ICT sector through channels of multifactor productivity.

5.2 Factors Contributing to Turkey’s Broadband Development

E-government initiatives have been a major driving force for development of the broadband ecosystem. Turkey has implemented a highly motivated e government program that created the necessary demand for enterprises in the ICT sector and motivated citizens for increased Internet usage. In this regard Turkey has demonstrated an interesting example that countries with relatively lower level of Internet penetration and usage ratios can exploit e-government programs as a means to ignite development of the broadband ecosystem.

Ensuring a shared vision among political leaders and technocrats has also been an important factor in pushing e-government programs. Since the coming of the new national government into power in 2002, political leaders saw e-government as a central instrument that would support public reforms and larger changes in the political system. A central organizational structure was formulated to develop strategies and put public money into the pipeline for a set of strategically important projects with high value and a high transaction volume.

The EU candidacy of Turkey and the membership negotiation process has provided a good opportunity for the country to reform its ICT and broadband legal and regulative frameworks. This process helped bureaucrats and top-level managers get closer to European institutions, policies and initiatives, and market developments in these sectors.

The high tempo growth of Turkish economy in the last decade is another factor supporting in the Internet revolution. The new national government has implemented ambitious market oriented reforms complemented with a proactive foreign policy which resulted in large sums of overseas capital flowing into the country. Communications, software and hardware segments of ICT industries have expanded rapidly.

5.2.1 Lessons learned

The Connectivity Scorecard is a composite index to assess the relative development level of ICTs (Figure 5‑2).* The Connectivity Scorecard is the first index to examine the quality and quantity of ICT usage and infrastructure and to link it to a country’s social and economic prosperity. 25 ‘Resource and Efficiency Driven’ and 25 ‘Innovation Driven’ economies are studied (as defined by the World Economic Forum (WEF)) in this first phase. The first step taken is to divide the economy into 3 ‘pillars’, business, consumer and government and assign weights to these pillars. The greatest weighting is given to the business pillar since it is a key contributor to productivity growth. For each component of the scorecard countries are benchmarked against the best-in-class in their tier. Low scores reflect gaps in a country’s infrastructure, usage or both. For more information see “Connectivity Scorecard” at: http://www.connectivityscorecard.org/methodology/ Turkey was found to have a robust consumer infrastructure due to its high mobile and PSTN penetration and also the recent progress in broadband networks. It also scores strong on consumer usage and skills metrics such as frequent Internet usage and uptake of voice services. According to the Scorecard the country’s business infrastructure is above average, with high penetration of secure Internet servers, and substantial business investments in ICT. Turkey also impresses on government-related metrics such as government spending on ICT and provision of government services online.

However the Scorecard points out that Turkey ranks somewhat poorly in business usage and skills, where its score is considerably lower than one might expect given the state of its business infrastructure. Turkey has made considerable progress in developing a robust ICT infrastructure but its weaker usage and skills scores indicate that the country is yet to fully realize its benefits. Therefore, it needs to place greater effort on ensuring the adoption and diffusion of ICTs to leverage competitive power.

Turkey faces a strategic opportunity in terms of broadband infrastructure development. The majority of the national broadband network is based on slower speed connections which do not optimally support advanced applications of next generation connectivity such as e-education, e-health, etc. There are signals suggesting the current broadband network has become somewhat overloaded.

To enhance a rapid take up of high bandwidth broadband networks the government should play a more effective and active role. First and foremost is ensuring effective regulation. The public stake in the incumbent operator should not prevent authorities from enforcing rules for fostering competition in the broadband market. Secondly, Turkey should design a complete and integrated broadband strategy for coordinating various individual pieces in the same direction.

To enable increased ICT and broadband adoption by businesses the government should exercise greater efforts to design effective programs and incentives. In particular skill gaps should be identified and adequately addressed with participation of private initiatives.

The lack of a suitable national accounting framework for more detailed analysis hinders international benchmarking in most emerging policy areas notably ICTs and innovation. Turkey should take measures to address this problem and ensure reliable and timely indicators are developed and made available to the public.